Precor bright spot in Amer Group's earnings

With the general sporting goods world slightly depressed, Amer Group’s fitness segment (i.e., Precor) remained one of only two of the company’s seven segments showing profit in the first nine months of this year compared to 2002. And operating profits for the third quarter were indeed a bright spot for the Finnish parent company, growing by 24 percent.

In addition, Precor had one of the company’s lowest losses in overall sales (-13 percent) in 2003 over 2002 compared to Amer’s other segments, with the exception of the Suunto sports instruments division (-10 percent) and the tobacco segment (-3 percent).

Precor’s net sales for the first nine months of this year were Euro 128.6 million compared to Euro 147 million for the same period in 2002. Operating profit for the first nine months of 2003 was Euro 19.3 million, compared to Euro 18.6 million last year, for a 4 percent gain. Tobacco was in fact the only other company segment to show a gain over 2002 (3 percent). Net sales for fitness in local currencies were similar to last year, but foreign exchange rates reduced net sales companywide by Euro 83 million — and had a slightly negative impact on operating profit — mostly due to the strengthening of the European Union’s Euro against the U.S. dollar.

Also, the patent litigation with Brunswick over a Life Fitness cross-trainer that allegedly infringed on Precor’s patent was settled, with Amer earning a $23 million settlement. The Life Fitness division will pay the settlement amount in two annual installments in 2003 and 2004, the statement said, in return for a sublicense of the patent rights held by Precor to use technology for elliptical fitness equipment. In addition, Precor will receive royalties on future sales of products by Life Fitness that are covered by the patent.

“In North America, major club organizations are holding off on purchases,” the company’s statement said, “and consumers are similarly cautious. Public sector organizations in the USA started to invest in fitness equipment again, which resulted in increased sales in the third quarter of the year following a quieter first half.

“Despite general uncertainty, the fitness sector as a whole is expected to continue growing,” the statement reported.

Although the report noted that third quarter sales were up mostly due to increases in treadmills and in the company’s newly introduced line of cycles, with elliptical sales being slightly down, further growth in the popularity of ellipticals is still expected.

In the last four quarters, Precor’s sales were (in Euros) 42.8 million with profits of 7.5 million (3Q ’03), 34.4 million with profits of 2.9 million (2Q ’03), 51.4 million with profits of 8.9 million (1Q ’03), and 39.5 million with profits of 6.3 million (4Q ’02). Amer acquired Precor in the fourth quarter of 2002.

“The sports equipment market continued to be challenging,” the report said, “and demand for sports equipment did not recover significantly.”

For details, go to www.amersports.com.